Sunday, 27 September 2015


The banking sector responded positively to macro-prudential policy adopted by BI. As told, BI relaxed macro prudential policy by way of stepping up Loan-to-Value ratio (LTV) or Financing to Value (FTV) for credit property and automotive. The policy was intended to keep the economic growth momentum.

The essential changes of LTV/FTV and down payment included some aspects among others change on the size of LTV ratio for credit property (KP) and FTV ratio for Syariah Property Credit.

Increased size of LTV/FTV ratio came to 10% and was applicable for ground houses, vertical homes and shop-houses, office houses starting form type 21 down and type 70 up. Meanwhile changes on rules for down payment for credit or motor vehicles Financing (Syariah) was applicable for 2- wheel or 3-wheel vehicles.

The downpayment was reduced to 5%; BI also regulated the procedures and conditioning for banks if they wished to apply LTV/FTV and amount of Down Payment in accordance with the new regulation.

Beside LTV and FTV ratio and down payment, relaxation was also applied on guarantee given by developers to banks in extending credit and financing and/or fund deposited and/or kept in escrow account an the creditor/financer bank.

The value of guarantee was at least the difference between the commitment of credit/financing with credit/financing exercised by banks. Meanwhile he guarantee given by other parties could be in the form of corporate guarantee, stand by letter of credit or bank guarantee.

Broadly speaking, relaxation of this regulation was based on the consideration that property and automotive credit had also connectivity with other economic sectors. In the end, the after effect of credit relaxation might boost economic growth.

Besides, this new policy was expected to stimulate the intermediary role of banks in credit financing to the public. They policy was written in PBI No.17/PBI/2015 on Loan to Value Ratio or Ratio financing to Value for Credit or Financing Property and Down Payment for Credit or Automotive Financing effective as per June 18, 2015.

On the other hand, BI had stipulated that the new LTV/FTV rules and the new Down Payment would be connected with bank performance in managing Non Performing Loans Which was an effort to mitigate risk to the relaxation given would not increase risk potentials.

Thereby it was expected that credit pipelining to the people would be enhanced but still observing the principle of prudence for the public or the bank. Now the expectant public could expect that the relaxation policy would open access to KPR and KKB.

Automotive producers were definitely the advantaged party by this macro prudential policy. Pressures on sales of 4 wheel and 2 wheel vehicles in the first 5 months was expected to be compensated by sales increase after BI’s relaxation policy.

Date of the 1.2 million units of car sales which was corrected to 1.1 million units this year was probably attainable. Developers would certainly respond positively to the relaxation of KPR policy which required LTV ratio. With increased LTV limit, people would have better chance to access KPR.

Increased KPR and KKP mortgage means greater opportunity for the economic sectors related to the two credit types. Job opportunities were wide open in line with growing demand for KPR and KKB mortgage. The ghost of works mass dismissal would soon diminish with bright prospect of the two sectors.

Growing demand in property and automotive signaled that the economic prospect of a country was expanding so it should discard the perception that Indonesia was falling into economic recession. The economic activities propelled by the property and automotive sectors which was capital intensive and labor intensive.

The only thing was that although this macro prudential policy opened broader room for banks be expensive in credit pipe lining to the property an automotive sectors, the prudential policy opened broader room for banks be expansive in credit pipe lining to the property an automotive sectors, the prudential policy must still be the main reference.

Noteworthy was the fact that the condition of economy was on the downturn, so if banks jacked up KPR and KKB, it was feared to increase NPL. The euphoria among the banking sector must not be out of control. (SS)

Business News - July 1, 2015

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